Insuring a strata titled property, or any property for that matter, is not as simple as using the construction cost. No matter the original construction cost, to be appropriately insured for an insurable event the estimate must include; escalation, demolition / removal of debris, re-design fees and application fees. These are all significant costs over and above the construction cost.

It is important to be appropriately insured, especially in this day and age when the “averaging clause” is typical in most policies. The averaging clause protects the Insurer by only paying on an insurance claim the percentage of the total replacement if the Insurer can prove that the site was being under insured. It is important to leave this exercise to the experts who understand construction costs and the insurance sector!

A real case study, such as the below, solidifies the importance of this exercise and why it is legislative driven within most states and territories for insurance valuations to be regularly updated by a professional.

CASE STUDY

A high end complex of 50 apartments were subject to significant damage due to a tropical cyclone. The damage was so significant a lot of the apartments were reduced to a shell.

The property was, at the time, insured for $48.7M. This was the original price of construction when it was built. This amount was put forward by the Developer and accepted by the Body Corporate Committee and Insurance Broker.

As a matter of fact, the building should have been insured for $59.2M which included; construction, escalation, demolition, removal of debris, re-design and documentation. Essentially only 82.2% of the property was insured.

The bill to rectify the damage to the property came in around $22.5M. As the insurance policy included the standard ‘averaging clause’ the Insurer was only subject to cover 82.2% or $18.5M of the $22.5M construction bill. The Owners of the apartments then had to raise $4M to be able to re-construct the property back to its former glory.

It is important to leave the value in which your property is insured, to the experts. GQS can confidently estimate the cost to rebuild your property inclusive of all appropriate allowances to ensure you are appropriately covered. On the other hand, you may also feel you are over-insured and paying unnecessary premiums. By taking a report prepared by a Quantity Surveyor to your Broker you could also decrease the value you are insured for and therefore decrease your premiums. Call 1300 290 235 today to arrange an insurance valuation of your building.